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Monday, January 3, 2011

Quality and Obama Care.

Welcome to 2011.

I suspect that most folks missed an interesting story that was published on the Times wire in US newspapers just before Christmas. The article described how new regulation set to take effect in January will direct a substantial portion of insurance premium dollars away from executive pay packages and overhead and instead will require increased support for medical care and health care quality improvement. Apparently insurance companies now can retain 25 percent of premium revenue for non-medical costs, but under the new rules they will be able to retain only 15 percent.

Well that sounds good, especially the part about increased spending on quality improvement.

I suspect that the way this is will play out will be that insurance companies will not reduce the actual amount of money for salaries and bonuses, but rather will just increase the premiums. If I do the arithmetic correctly, that will require an increase in premium rates by about 66%. Again if my arithmetic is right, this will not go over very well. A massive raise in health insurance rates may not be perceived as a totally positive step forward. But we will leave that battle to someone else.

But I think there is an important question here, and that is, is there is a way in which money collected through the private sector can be allocated to quality improvement with a reasonable expectation of success.My guess is that this will be a major challenge.

Let’s see if we can break this down.1: If money collected by individual insurers remains in the hands of the insurer to do good things, there is little reason to believe that each insurance company would develop an effective distribution process to move funds into the appropriate sectors to improve clinical and laboratory care. Further, development of distribution offices within each insurance company would require massive costs and result in huge redundancy.As US insurers do not cross state borders, this would result in a huge amount of geographic mal-distribution of funds and resources.

2: If each insurer was required to transfer the funds to a central government office, it would likely be perceived as a new tax, and would probably get tied up in a series of court cases ending at the Supreme Court. That would take years and cost a fortune resulting in quality improvement money mainly support legal staff.

3: If each insurer was required to pass funds to a private sector central Quality Improvement Office operated by the consortium of insurers, the costs of redundancy would go down, but process and distribution costs would go up.In addition there would still need to be an active oversight agency to establish and monitor rules, and that too would create even more costs.

So while the idea sounds great, my cynical self sees more opportunities for failure than success.It will be interesting to watch to see what happens. But I am not holding my breath.

In the meantime, in Canada and other countries where this is a public health funding model, there is every reason that agencies be designed for Quality Initiative Allocations with independent oversight.In Canada we would still end up with redundant spending because of our obsolete structure makes health a provincial responsibility with trivial federal funding support.

The reality is quality initiatives programs would create net savings not net losses, so there should still be an incentive to implement these agencies.So far the answer is that they do not exist.

There are many challenges for a country with a population 10 time that of Canada and 12 times that of Australia, especially at a time where the economy is growing so slowly. It is not the intend of MMLQR to be a political blog.

But since writing the commentary on Obama-care insurance rates have gone up steeply in many states. And it is hard to argue for federal support of quality improvement at the same time that the Baldrige Award program has been de-funded.

Mr. Obama and I do not chat regularly, indeed I can not recall a single call that I have made to him, any that he has made to me.I suspect, however, that today Obama healthcare is pretty low on the priority list. I doubt there will NOT be much talk about insurance funds being allocated to health care quality anytime between now and Nov '12.

In Canada most provinces are nearing the point that Health consumes about 50% of each provinces global budget with the 3 largest allocations going to union negotiated wages and benefits, rising administration costs, and pharmaceuticals. The amounts allocated to patient safety ad laboratory quality projects and initiatives is minor-est part of minor. Helps stimulate productive creativity.